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Mike's great 2012 talk [1].

Unfortunately 2 years later, we're not much further in those developments. Bitcoin has severe limitations, also because it has now a legacy to support. New projects can start with a fresh design. So far we've only seen very few new approaches. While many Bitcoiners realize the imperfections of the system, very few actually think there could be something better.

[1] https://www.youtube.com/watch?v=mD4L7xDNCmA

The author, self admittedly being a little late to cryptocurrencies, kind of buried the lead here: cryptocurrencies and cryptocontracts aren't twin technologies; the ability to create and enforce contracts is built into the Bitcoin protocol.

A lot of that functionality is currently dormant, (remember, the reference Bitcoin-Qt client is still hasn't reached version 1.0) it's likely to get enabled once other issues within Bitcoin are resolved.

Also, there's been a lot of thought put into these concepts already:

Mike Hearn's talk at the Bitcoin 2012 London conference (https://www.youtube.com/watch?feature=player_embedded&v=mD4L...) on Contracts, Smart property, etc.

Bitcoin wiki entries on Contracts (https://en.bitcoin.it/wiki/Contracts), Smart property (https://en.bitcoin.it/wiki/Smart_Property) and Agents (https://en.bitcoin.it/wiki/Agents)

Nick Szabo's seminal paper Formalizing and Securing Relationships on Public Networks (http://szabo.best.vwh.net/formalize.html)

Ripple Labs (https://ripple.com/wiki/User:Justmoon/Contracts:_Overview) is working on contracts too.

The whole point of de-centralizing a financial system is to move away from a central source for lending & borrowing. With Crypto currencies, it would be easier than ever for you to lend/borrow money to/from your friends/colleagues/investors etc.

The idea & support for transactions like borrowing, lending, escrow and likely all other transaction types that you can think of are already built into Bitcoin & it's design. They are just not being used as of today.

Infact, I would say it's safer to carry out such transactions using Crypto currencies than with a Bank. Please see this video: http://www.youtube.com/watch?v=mD4L7xDNCmA

Satoshi was clever enough to think of all use-cases and he made sure that the design & eco-system would be solid enough to replace centuries old incumbents like Banks. The features are just sitting and hiding there in the protocol to be made use of when there is enough traction & momentum.

⬐ niallpaterson

I like bitcoin, but a government has the right to define the currency it's citizens use (i.e what is legal tender and what's not) and I think for a bank targeting ordinary people, you have to deal in legal tender. I don't think a bank for the 0.0001% who use bitcoin is going to be able to revolutionise banking..

"All of the other Bitcoin use cases I know of are incremental in nature"

I don't think most people are aware of some of the crazy things Bitcoin could enable. Bitcoin is programmable money in a much deeper way than PayPal/Stripe/whatever APIs are "programmable money". It's a global distributed ledger with a scripting language [1] for performing a wide variety of transactions [2][3] with zero or minimal counterparty risk.

However, it's certainly possible we're shooting ourselves in the foot by growing too quickly and unleashing the wrath of banks and governments before any killer applications are built, but if these ideas are compelling enough they'll survive in some form.

1. https://en.bitcoin.it/wiki/Script

2. https://en.bitcoin.it/wiki/Contracts

3. https://www.youtube.com/watch?v=mD4L7xDNCmA

More reading for the curious:

https://en.bitcoin.it/wiki/Smart_Property

https://docs.google.com/document/d/1AnkP_cVZTCMLIzw4DvsW6M8Q...

https://en.wikipedia.org/wiki/Decentralized_Autonomous_Corpo...

https://github.com/DavidJohnstonCEO/DecentralizedApplication...

https://bitcointalk.org/index.php?topic=152334.0;all

⬐ deepinsand

Great sources, in the middle of the YouTube video now. Though I've always had this question about "Bitcoin as a protocol":

Isn't the viability of the distributed ledger predicated on the value of Bitcoin? Workers verify transactions because they get paid in something that they value. If the value of Bitcoin drops (say: government regulation), then the incentive to mine/verify goes away?

Assuming that happens and the miners go away, wouldn't the ledger be open to malicious attack?

⬐ tlrobinson

Yes, that could be a problem. In an efficient market the total mining costs for the network (and thus the cost to achieve 51% of mining power) will tend to be slightly less than the value received from block rewards and fees. It's also the main reason I don't foresee alt-coins proliferating. People will prefer the most secure network.

There are other ways to "fund" the network security: https://en.bitcoin.it/wiki/Funding_network_security https://bitcointalk.org/index.php?topic=157141.msg1665332#ms... I don't know if these schemes would work if the value drops too low though.

The scripting language is the reason I'm betting on bitcoin in the long run. The scripting language lets you do so many interesting things with it (escrow, wills, and surely lots of things I can't envision).

Check out this video about bitcoin contracts which talks about the scripting language: https://www.youtube.com/watch?feature=player_embedded&v=mD4L...

Unfortunately, if I understand correctly, non-standard transactions are not accepted by most miners currently, which means the interesting things in the previously linked contracts video wouldn't work. This should improve over time as new transactions are proposed and added to the list of standard transactions. The bitcointalk forums, while having a lot of noise, also has interesting discussions about new transaction types.

Bitcoin combined with its scripting language is just too good of an idea to go away, and I think we'll start to see more interesting transactions within a couple years.

edit: Forgot to mention that everyone who is manic about bitcoin never even mentions the good ideas in the actual protocol, they only focus on the crazy price swings. Learning about the backing technology is the best way to feel confident about bitcoin's future.

Yes, this is the most exciting part of Bitcoin, IMHO. It's quite amazing what sort of problems you can solve.

I highly recommend watching this talk by Mike Hearn, as well as reading the links in NhanH's comment: https://www.youtube.com/watch?v=mD4L7xDNCmA

Indeed. Mike Hearn's talk at Bitcoin 2012 is a great overview of all that: http://www.youtube.com/watch?v=mD4L7xDNCmA

All these goodies just waiting in there to come out and play.

Mike Hearn has talked some on how you could use existing functionality in the bitcoin protocol to issue loans. Around 25:50 he talks about ripple + bitcoin which is a practical autonomous lending system. A little bit simpler than the smart property way which is pretty deep down in the protocol.

http://www.youtube.com/watch?v=mD4L7xDNCmA&t=17m30s

Decentralized peer to peer currency exchanges might be possible:

http://www.youtube.com/watch?v=mD4L7xDNCmA&t=24m57s

https://en.bitcoin.it/wiki/Ripple_currency_exchange